The bankruptcy forum a user asked, “I feel really overwhelmed. I am considering filing bankruptcy but everything I read online seems so complicated. Can you just give me the basics of what I really need to know about bankruptcy and the bankruptcy process?”
Filing for bankruptcy can seem a bit overwhelming, and unless you have a legal degree it may seem like it’s impossible to understand all the federal and state regulations and rules. The good news is with the proliferation of the internet and great articles and research online finding out what you need to know is easier than ever.
So with that in mind, let’s take a look at the basics of bankruptcy and what you need to know to make the decision about whether filing for bankruptcy is right for you.
Bankruptcy Basics: What Is Bankruptcy?
Bankruptcy is a legal process which allows debtors who are overwhelmed and facing a financial crisis to potentially either have certain unsecured debts discharged through Chapter 7 bankruptcy or restructured through Chapter 13 bankruptcy.
Bankruptcy is governed by federal bankruptcy laws and the cases are heard in federal court. If you do decide to file for bankruptcy protection your creditors will be forced to suspend creditor actions (at least temporarily) and you may also be able to stop a home foreclosure, bank account levies, property repossessions, and certain wage garnishments.
Bankruptcy Basics: Different types of bankruptcies and what I need to know
If you have decided to file bankruptcy and you understand what that entails, the next step is determining what type of bankruptcy to file. There are four bankruptcy options for individuals provided under federal bankruptcy law:
Chapter 7 bankruptcy– Chapter 7 bankruptcy is that the commonest sort of bankruptcy filed. It is a liquidation bankruptcy and may allow a bankruptcy trustee to liquidate certain types of nonexempt property.
Chapter 11 bankruptcy – Chapter 11 bankruptcy is a reorganization bankruptcy and is generally used by businesses to restructure their debts while continuing their business operations.
Chapter 12 bankruptcy- Chapter 12 bankruptcy is reserved for family farmers and fishermen.
Chapter 13 bankruptcy– Chapter 13 bankruptcy allows debtors to keep most of their assets and restructure their debt payments over a 3 or 5 year debt repayment period.
Bankruptcy basics: What Does It Cost to File for Bankruptcy?
The laws and regulations can also be so complicated that many debtors will need to hire a bankruptcy attorney to help them complete the bankruptcy forms and petition and file them with the bankruptcy court.
Filing bankruptcy is not for everyone. In fact, bankruptcy will not eliminate all of your unsecured debts, including child support, alimony, most taxes, and most school loans. It will also not eliminate secured debts. Talk to a bankruptcy lawyer if you have questions about your options.